NOTE
8 – Notes and Loans Payable
Notes
and loans payable consist of:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
Loan payable to Pasquale
Ferro, interest at 12% per annum, due December 2020.
|
|
$
|
224,000
|
|
|
$
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to brother of Marco Alfonsi,
Chief Executive Officer of the Company, interest at 10% per annum, due August 22, 2016.
|
|
|
-
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to Arena Special Opportunities
Partners I, LP, due September 10, 2021.
|
|
|
2,675,239
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable to Arena Special Opportunities
Fund, LP, due September 10, 2021.
|
|
|
102,539
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable
to U.S. Small Business Administration (PPP), interest at 1% per annum. The note matures in January 2023. Payments are deferred
for ten months after the end of the covered period. The Note has been submitted to the SBA for forgiveness withing the bank
guidelines.
|
|
|
194,940
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Notes and Loan Payable
|
|
|
3,196,718
|
|
|
|
35,000
|
|
Less: Unamortized Finance Cost
|
|
|
(1,174,247
|
)
|
|
|
-
|
|
Less: Current
Portion
|
|
|
(1,827,531
|
)
|
|
|
(35,000
|
)
|
Long-term Portion
|
|
$
|
194,940
|
|
|
$
|
-
|
|
NOTE
9 – Preferred Stock
Each
share of Series A Preferred Stock is convertible into 33,334 shares of CANB common stock and is entitled to 66,666 votes. All
Preferred Shares shall rank senior to all shares of Common Stock of the Company with respect to liquidation preferences and shall
rank pari passu to all current and future series of preferred stock, unless otherwise stated in the certificate of designation
for such preferred stock. In the event of a Liquidation Event, whether voluntary or involuntary, each holder may elect (i) to
receive, in preference to the holders of Common Stock, a one-time liquidation preference on a per-share amount equal to the per-share
value of preferred shares on the issuance date, as recorded in the Company’s financial records, or (ii) to participate pari
passu with the Common Stock on an as-converted basis. Subject to any adjustments, the Series A holders shall be entitled to
receive such dividends paid and distributions made to the holders of shares of Common Stock on an as converted basis.
Each
share of Series B Preferred Stock has the first preference to dividends, distributions and payments upon liquidation, dissolution
and winding-up of the Company, and is entitled to an accrued cumulative but not compounding dividend at the rate of 5% per annum
whether or not declared. After six months of the issuance date, such share and any accrued but unpaid dividends can be converted
into common stock at the conversion price which is the lower of (i) $0.0101; or (ii) the lower of the dollar volume weighted average
price of CANB common stock on the trading day prior to the conversion day or the dollar volume weighted average price of CANB
common stock on the conversion day. The shares of Series B Preferred Stock have no voting rights.
Each
share of Series C Preferred Stock has preference to payment of dividends, if and when declared by the Company, compared to shares
of our common stock. Each Preferred Series C share is convertible into 25,000 shares of common stock. The shares of Series C Preferred
Stock have voting rights as if fully converted.
Each
share of Series D Preferred Stock has 10,000 shares of voting rights only pari passu to common shares voting with no conversion
rights and no equity participation. The Company can redeem Series D Preferred Stock at any time for par value.
On
January 28, 2019, the Company issued 33,333 shares of CANB common stock to a consultant of the Company in exchange for the retirement
of 1 share of CANB Series A Preferred Stock.
From
February 21, 2019 to March 12, 2019, the Company issued aggregately 67,405 shares of CANB common stock to RedDiamond in exchange
for the retirement of 157,105 shares of CANB Series B Preferred Stock.
On
May 28, 2019, the Company issued 3 shares of CANB Series A Preferred Stock to Stanley L. Teeple pursuant to the employment agreement
with him. The fair value of the issuance totaled $1,203,000 and will be amortized over the vesting period of four years.
On
April 26, 2019, the Company issued 6,436 shares of CANB common stock to RedDiamond in exchange for the retirement of 15,000 shares
of CANB Series B Preferred Stock.
On
May 1, 2019, the Company issued 8,581 shares of CANB common stock to RedDiamond in exchange for the retirement of 20,000 shares
of CANB Series B Preferred Stock.
On
May 9, 2019, the Company issued 23,710 shares of CANB common stock to RedDiamond in exchange for the retirement of 55,263 shares
of CANB Series B Preferred Stock.
On
June 7, 2019, the Company issued 10,726 shares of CANB common stock to RedDiamond in exchange for the retirement of 25,000 shares
of CANB Series B Preferred Stock.
On
August 13, 2019, the Company issued 97,607 shares of CANB common stock to RedDiamond in exchange for the retirement of 227,590
shares of CANB Series B Preferred Stock.
On
December 16, 2019, the Company issued 35,666 shares of CANB common stock to RedDiamond as agreed for the early retirement of CANB
Series B Preferred Stock converted in August 2019.
From
January 1, 2021 through March 25, 2021, the Company issued 1,950 shares of CANB Series Preferred D Stock to officers of the
Company.
In
March 2021, the Company issued 50 Preferred C shares each to Marco Alfonsi, Stanley Teeple, and Pasquale Ferro for services rendered.
Each Preferred C was immediately issuable as common at 25 thousand to one so the total issuance was 1,250,000 common shares for
each recipient.
NOTE
10 – Common Stock
From
January 4, 2019 to March 27, 2019, the Company issued aggregately 138,107 shares of CANB common stock to multiple investors pursuant
to relative Stock Purchase Agreements dated on various dates, in exchange for total proceeds of $1,196,100.
On
January 14, 2019, the Company issued 25,000 shares of CANB common stock to Hudilab, Inc. (“HUDI”), pursuant to a License
and Acquisition Agreement for purchase of the technology owned by HUDI.
From
January 18, 2019 to March 17, 2019, the Company issued aggregately 82,000 shares of CANB common stock to multiple consultants
for services rendered.
From
January 19, 2019 to March 27, 2019, the Company issued aggregately 3,893 shares of CANB common stock to employee and officers
of the Company pursuant to employee agreement and in satisfaction of accrued compensation for the quarter ended March 31, 2019.
On
February 5, 2019, the Company issued 6,667 shares to the owner of TZ Wholesale LLC, pursuant to a Memorandum of Understanding
(the “MOU”) dated November 9, 2018.
On
February 20, 2019, the Company issued 3,333 shares of CANB common stock to owners of Seven Chakras pursuant to the Chakras Agreement
dated January 31, 2019.
From
April 1, 2019 through June 30, 2019 the Company issued an aggregate of 51,706 shares of CANB Common Stock to multiple consultants
for services rendered.
From
April 1, 2019 through June 30, 2019, the Company issued an aggregate of 13,916 shares of CANB Common Stock to members of the Advisory
Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
April 1, 2019 through June 30, 2019, the Company issued an aggregate of 4,615 shares of Common Stock under the terms of executive
employment agreements.
From
April 1, 2019 through June 30, 2019, the Company issued an aggregate of 86,207 shares of CANB shares under the terms of the Stock
Purchase Agreements for total proceeds of $750,000.
From
July 1, 2019 through September 30, 2019, the Company issued an aggregate of 18,061 shares of CANB Common Stock to multiple consultants
for services rendered.
From
July 1, 2019 through September 30, 2019, the Company issued an aggregate of 18,333 shares of CANB Common Stock to members of the
Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2019 through September 30, 2019, the Company issued an aggregate of 16,000 shares of Common Stock under the terms of executive
employment agreements.
From
July 1, 2019 through September 30, 2019, the Company issued an aggregate of 155,241 shares of CANB shares under the terms of the
Stock Purchase Agreements for total proceeds of $1,350,600.
From
July 1, 2019 through September 30, 2019, the Company issued an aggregate of 40,247 shares of CANB shares under the terms of the
Joint Venture Agreement.
From
October 1, 2019 through December 31, 2019, the Company issued an aggregate of 122,258 shares of CANB Common Stock to multiple
consultants for services rendered.
From
October 1, 2019 through December 31, 2019, the Company issued an aggregate of 14,167 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
October 1, 2019 through December 31, 2019, the Company issued an aggregate of 5,000 shares of Common Stock under the terms of
executive employment agreements.
From
October 1, 2019 through December 31, 2019, the Company issued an aggregate of 125,000 shares of CANB Common Stock under the terms
of an inventory purchase agreement for total proceeds of $487,500.
From
January 1, 2020 through March 31, 2020, the Company issued an aggregate of 27,500 shares of CANB Common Stock to multiple consultants
for services rendered.
From
January 1, 2020 through March 31, 2020, the Company issued an aggregate of 31,335 shares of CANB Common Stock to members of the
Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
January 1, 2020 through March 31, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to First Fire Global
Opportunities Fund, LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.
From
January 1, 2020 through March 31, 2020, the Company issued an aggregate of 99,508 shares of CANB Common Stock to FirstFire Global
Opportunities Fund, LLC for returnable shares pursuant to a junior convertible promissory note purchase agreement.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 111,734 shares of CANB Common Stock to multiple consultants
for services rendered.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 20,319 shares of CANB Common Stock to members of the Advisory
Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 30,000 shares of CANB Common Stock to an employee for
services rendered.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to SRAX, Inc. according
to a platform access agreement.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 50,000 shares of CANB Common Stock to Mediiusa Group,
Inc. according to a hemp processing use agreement.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 24,545 shares of CANB Common Stock to Labrys Fund, L.P.
for a commitment fee pursuant to a junior convertible promissory note purchase agreement.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 118,000 shares of CANB Common Stock to Labrys Fund, L.P.
for returnable shares pursuant to a junior convertible promissory note purchase agreement.
From
April 1, 2020 through June 30, 2020, the Company issued an aggregate of 20,000 shares of CANB Common Stock to Eagle Equities,
LLC for a commitment fee pursuant to a junior convertible promissory note purchase agreement.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 145,000 shares of CANB Common Stock to multiple consultants
for services rendered.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 100,000 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 478,715 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
July 1, 2020 through September 30, 2020, the Company received an aggregate of 543,715 shares of CANB Common Stock from an exchange
agreement whereby shares of Iconic Brands, Inc. held by the Company were exchanged for shares of stock in the Company held by
Iconic Brands, Inc.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 478,715 shares of CANB Common Stock for the acquisition
of inventory.
From
July 1, 2020 through September 30, 2020, the Company issued an aggregate of 185,000 shares of CANB Common Stock to FirstFire Global
Opportunities Fund, LLC pursuant to a junior convertible promissory note purchase agreement.
On
July 29, 2020, CANB and Iconic Brands (ICNB) completed a share exchange whereby the one million shares of ICNB common stock held
by CANB were exchanged for a fair value exchange of five hundred forty three thousand seven hundred fifteen shares of CANB in
order to settle a contract valuation true-up with ICNB for the purchase of Green Grow Farms,. Inc.
From
October 1, 2020 through December 31, 2020, the company issued an aggregate of 435,311 shares of CANB Common Stock to multiple
consultants for services rendered.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 70,000 shares of CANB Common Stock to members of
the Advisory Board, Medical Advisory Board, and Sports Advisory Board for services rendered.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 50,000 shares of Common Stock under the terms of
hemp processing use agreement.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 600,000 shares of Common Stock under the terms of
Stock Purchase Agreements for total proceeds of $300,000.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 193,524 shares of Common Stock to FirstFire Global
as agreed for conversion shares related to a note payable.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 394,304 shares of CANB Common Stock to Arena Special
Opportunities Partners I, LP for a commitment fee pursuant to a securities purchase agreement.
From
October 1, 2020 through December 31, 2020, the Company issued an aggregate of 15,133 shares of CANB Common Stock to Arena Special
Opportunities Fund, LP for a commitment fee pursuant to a securities purchase agreement.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 5,932,000 shares of Common Stock under its Reg
A-1 registration currently in effect and an additional 130,750 shares of common stock to various consultants for services.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 355,057 shares of Common Stock under an asset acquisition
agreement with Botanical Biotech.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 355,250 shares of Common Stock under note conversion
agreement.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 600,000 shares of Common Stock under a note conversion
agreement.
From
January 1, 2021 through March 25, 2021 the Company issued an aggregate of 150 shares of Preferred C shares under multiple employment
agreements. The Preferred C shares converted to 3,750,000 shares of Common Stock upon issuance.
NOTE
11 – Stock Options and Warrants
A
summary of stock options and warrants activity follows:
|
|
Shares
of Common Stock Exercisable Into
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Warrants
|
|
|
Total
|
|
Balance, December 31, 2018
|
|
|
20,167
|
|
|
|
7,492
|
|
|
|
27,659
|
|
Granted in 2019
|
|
|
56,667
|
|
|
|
-
|
|
|
|
56,667
|
|
Cancelled in 2019
|
|
|
(167
|
)
|
|
|
-
|
|
|
|
(167
|
)
|
Exercised
in 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
76,667
|
|
|
|
7,492
|
|
|
|
84,159
|
|
Granted in 2020
|
|
|
1,120,532
|
|
|
|
3,557,605
|
|
|
|
4,678,137
|
|
Cancelled 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2020
|
|
|
1,197,199
|
|
|
|
3,565,097
|
|
|
|
4,762,296
|
|
Issued
and outstanding stock options as of December 31, 2020 consist of:
Year
|
|
Number
Outstanding
|
|
|
Exercise
|
|
|
Year
of
|
|
Granted
|
|
And
Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
20,000
|
|
|
$
|
0.30
|
|
|
|
2023
|
|
2019
|
|
|
56,667
|
|
|
$
|
0.30
|
|
|
|
2022
|
|
2020
|
|
|
1,120,532
|
|
|
$
|
0.361
|
|
|
|
2025
|
|
|
|
|
1,197,199
|
|
|
|
|
|
|
|
|
|
On
June 11, 2018, the Company granted 10,000 options of CANB common stock to Carl Dilley, a former director of the Company, in exchange
for the retirement of a total of 10,000 shares of CANB common stock from Carl Dilley. The options are exercisable for the purchase
of one share of the Registrant’s Common Stock at an exercise price of $0.30 per share. The Options are fully vested and
are exercisable as of the Grant Date and all shall expire June 11, 2023. The value of the Stock Options ($84,000) were calculated
using the Black Scholes option pricing model and the following assumptions: (i) $8.40 share price, (ii) 5 years term, (iii) 262.00%
expected volatility, (iv) 2.80% risk free interest rate and the difference between this value and the fair value of retired shares
was expensed in the quarterly period ended June 30, 2018.
On
October 21, 2018, the Company granted 10,000 options of CANB common stock to Stanley L. Teeple, an officer and Director of the
Company. The options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price
of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire October 1, 2023.
The values of the Stock Options ($118,200) were calculated using the Black Scholes option pricing model and the following assumptions:
(i) $11.82 share price, (ii) 5 years term, (iii) 221.96% expected volatility, (iv) 3.05% risk free interest rate and the fair
value of options was expensed in the quarterly period ended December 31, 2018
On
September 9, 2019, the Company granted 26,667 options of CANB common stock to Johnny Mack, a former officer of the Company. The
options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.30 per
share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire September 9, 2022. The values
of the Stock Options ($192,000) were calculated using the Black Scholes option pricing model and the following assumptions: (i)
$7.20 share price, (ii) 3 years term, (iii) 463,34% expected volatility, (iv) 1.46% risk free interest rate and the fair
value of options was expensed in the quarterly period ended September 30, 2019.
On
October 15, 2019, the Company granted 10,000 options of CANB common stock each to Frederick Alger Boyer, Jr., Ronald A. Silver
and James F. Murphy, directors of the Company. The options are exercisable for the purchase of one share of the Registrant’s
Common Stock at an exercise price of $0.30 per share. The Options are fully vested and are exercisable as of the Grant Date and
all shall expire October 15, 2022. The values of the Stock Options ($63,000 each) were calculated using the Black Scholes option
pricing model and the following assumptions: (i) $6.30 share price, (ii) 3 years term, (iii) 463,34% expected volatility,
(iv) 1.60% risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2019.
On
December 9, 2020, the Company granted 12,500 options of CANB common stock to Ronald A. Silver, a director of the Company. The
options are exercisable for the purchase of one share of the Registrant’s Common Stock at an exercise price of $0.50 per
share. The Options are fully vested and are exercisable as of the Grant Date and all shall expire December 9, 2025. The values
of the Stock Option ($12,500) was calculated using the Black Scholes option pricing model and the following assumptions: (i) $.45
share price, (ii) 5 years term, (iii) 168% expected volatility, (iv) .41% risk free interest rate and the fair value of options
was expensed in the quarterly period ended December 31, 2020.
On
December 29, 2020, the Company granted 277,008 options of CANB common stock each to Stanley Teeple, Pasquale Ferro, Phil Scala
and Marco Alfonsi, Officers of the Company. The options are exercisable for the purchase of one share of the Registrant’s
Common Stock at an exercise price of $0.36 per share. The Options are fully vested and are exercisable as of the Grant Date and
all shall expire December 29, 2025. The values of the Stock Options ($140,997 each) were calculated using the Black Scholes option
pricing model and the following assumptions: (i) $.51 share price, (ii) 5 years term, (iii) 168% expected volatility, (iv) .41%
risk free interest rate and the fair value of options was expensed in the quarterly period ended December 31, 2020.
Issued
and outstanding warrants as of December 31, 2020 consist of:
Year
|
|
Number
Outstanding
|
|
|
Exercise
|
|
|
Year
of
|
|
Granted
|
|
And
Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
825
|
|
|
$
|
300
|
|
|
|
2020
|
|
2018
|
|
|
6,667
|
|
|
$
|
13,034
|
(a)
|
|
|
2023
|
|
2020
|
|
|
3,557,605
|
|
|
$
|
1,273,623
|
|
|
|
2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,565,097
|
|
|
|
|
|
|
|
|
|
(a)
110% of the closing price of the Company’s common stock on the date that the Holder funds the full purchase price of the
Note.
NOTE
12 – Income Taxes
No
provisions for income taxes were recorded for the periods presented since the Company incurred net losses in those periods.
The
provisions for (benefits from) income taxes differ from the amounts determined by applying the U.S. Federal income tax rate of
21% to pretax income (loss) as follows:
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Expected
income tax (benefit) at 21%
|
|
$
|
(1,200,467
|
)
|
|
$
|
(1,239,160
|
)
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based
compensation
|
|
|
474,428
|
|
|
|
923,470
|
|
|
|
|
|
|
|
|
|
|
Non-deductible stock-based
interest
|
|
|
94,853
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Increase
in deferred income tax assets valuation allowance
|
|
|
631,186
|
|
|
|
315,690
|
|
|
|
|
|
|
|
|
|
|
Provision
for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
income tax assets consist of:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
|
1,931,355
|
|
|
|
1,300,168
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(1,931,355
|
)
|
|
|
(1,300,168
|
)
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
-
|
|
|
$
|
-
|
|
Based
on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred income
tax asset of $1,931,355 attributable to the future utilization of the $9,196,924 net operating loss carryforward
as of December 31, 2020 will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred income
tax asset in the financial statements at December 31, 2020. The Company will continue to review this valuation allowance and make
adjustments as appropriate. The net operating loss carryforward expires in years 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032,
2033, 2034, 2035, 2036, 2037, 2038, 2039 and 2040 in the amount of $1,369, $518,390, $594,905, $686,775, $159,141, $151,874, $135,096,
$166,911, $311,890, $25,511, $338,345, $381,638, $499,288, $716,858, $1,503,282, and $3,005,651, respectively.
Current
tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income may be limited.
The
Company’s U.S. Federal and state income tax returns prior to 2016 are closed and management continually evaluates expiring
statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The statute of limitations
on the 2016 tax year returns expired in September 2020.
The
Company recognizes interest and penalties associated with uncertain tax positions as part of the income tax provision and would
include accrued interest and penalties with the related tax liability in the consolidated balance sheets. There were no interest
or penalties paid during 2020 and 2019.
NOTE
13 – Segment Information
The
Company has one reportable segment: Durable Equipment Products.
The
accounting policies of the segment described above are the same as those described in Summary of Significant Accounting Policies
in Note 3. The Company evaluates the performance of the Durable Equipment Products segment based on income (loss) before income
taxes, which includes interest income.
|
|
Durable
Equipment
Products
|
|
Three months
ended December 31, 2020
|
|
|
|
|
Revenue
from external customers
|
|
|
367,673
|
|
Revenue
from other segments
|
|
|
-
|
|
Segment
profit
|
|
|
276,226
|
|
Segment
assets
|
|
|
2,603,379
|
|
|
|
|
|
|
Twelve months
ended December 31, 2020
|
|
|
|
|
Revenue
from external customers
|
|
|
1,176,220
|
|
Revenue
from other segments
|
|
|
-
|
|
Segment
profit
|
|
|
691,482
|
|
Segment
assets
|
|
|
2,603,379
|
|
|
|
Three
Months
Ended
December
31, 2020
|
|
|
Twelve
Months
Ended
December
31, 2020
|
|
|
|
|
|
|
|
|
Total
profit for reportable segment
|
|
$
|
278,719
|
|
|
$
|
694,828
|
|
Other
income (expense) - net
|
|
|
(2,493
|
)
|
|
|
(3,346
|
)
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
276,226
|
|
|
$
|
691,482
|
|
NOTE
14 – Commitments and Contingencies
Employment
Agreements
On
December 28, 2020, the Company entered into new three-year Employment Agreements with CEO Marco Alfonsi, CFO Stanley Teeple, and
Pure Health Products LLC Pasquale Ferro . Under these agreements, the are to receive a i) base salary of fifteen thousand dollars
($15,000.00) per month, ii) is eligible to receive cash and or stock bonuses, iii) shall receive a stock bonus in accordance with
the Company’s Incentive Stock Option Plan (“ISOP”) in an amount of one-hundred thousand dollars ($100,000) per
year of the Agreement, iv) 200 shares of the Company’s Series C Preferred stock, v) usual and customary benefits including
expense reimbursement, health and life insurance plan reimbursements and allowances. Phil Scala. Interim COO also received a similar
agreement with a base compensation of fifty-two thousand annually, $100,000 in ISO, and 20 Preferred C shares. The foregoing agreements
have replaced the agreements described below.
On
October 3, 2017, the Company executed an Executive Employment Agreement with Marco Alfonsi (“Alfonsi”) for Alfonsi
to serve as the Company’s chief executive officer and interim chief financial officer and secretary for cash compensation
of $10,000 per month. Pursuant to the agreement, the Company issued a share of CANB Series A Preferred Stock to Alfonsi on October
4, 2017. Alfonsi may terminate his employment upon 30 days written notice to the Company. The Company may terminate Alfonsi’s
employment upon written notice to Alfonsi by a vote of the Board of Directors. At October 21, 2018, this former agreement was
terminated due to the execution of a new Employment Agreement with Marco Alfonsi for Alfonsi to serve as the Company’s chief
executive officer and chairman of the board for cash compensation of $15,000 per month. Pursuant to the new agreement, three of
the eight previously issued shares of CANB Series A Preferred Stock were returned to the Company and converted into 30,000,000
common shares. Alfonsi may terminate his employment upon 30 days written notice to the Company. The new agreement has an initial
term of four years and can be terminated upon the resignation or death of Mr. Alfonsi, and also can be terminated by the Company
due to the failure or neglect of Mr. Alfonsi to perform his duties, or due to the misconduct of Mr. Alfonsi in connection with
the performance.
On
February 12, 2018, the Company executed an Executive Service Agreement (“Posel Agreement”) with David Posel. The Posel
Agreement provides that Mr. Posel services as the Company’s Chief Operating Officer for a term of 4 years. The Posel Agreement
also provides for compensation to Mr. Posel of $5,000 cash per month and the issuance of 1 share of Series A Preferred Stock at
the inception of the Posel Agreement. The Posel Agreement can be terminated upon the resignation or death of Mr. Posel, and also
can be terminated by the Company due to the failure or neglect of Mr. Posel to perform his duties, or due to the misconduct of
Mr. Posel in connection with the performance. On February 12, 2018, 1 share of CANB Series A Preferred Stock were issued to Mr.
Posel. Since execution of the Posel Agreement, Mr. Posel has been re-assigned to COO for Pure Health Products, the Company’s
subsidiary.
On
February 16, 2018, the Company executed an Executive Service Agreement (“Holtmeyer Agreement”) with Andrew W. Holtmeyer.
The Holtmeyer Agreement provides that Mr. Holtmeyer serves as the Company’s Executive Vice President Business for a term
of 3 years. The Holtmeyer Agreement also provides for compensation to Mr. Holtmeyer of $10,000 cash per month and the issuance
of 3, 2 and 1 share of Series A Preferred Stock at the beginning of each year. The Holtmeyer Agreement can be terminated upon
the resignation or death of Mr. Holtmeyer, and also can be terminated by the Company due to the failure or neglect of Mr. Holtmeyer
to perform his duties, or due to the misconduct of Mr. Holtmeyer in connection with the performance. At December 29, 2018, this
Holtmeyer Agreement was terminated due to the execution of a new Employment Agreement with Andrew W Holtmeyer. The second agreement
provides that Mr. Holtmeyer serves as the Company’s Executive Vice President Business for a term of 4 years. The second
agreement also provides for compensation to Mr. Holtmeyer of $15,000 cash per month and the issuance of 829 shares of common stock
upon signing of the agreement. Effective April 1, 2020, Mr. Holtmeyer’s compensation was changed to a straight commission
on sales and collection based upon his efforts in lieu of any base compensation. He also will receive no further Company benefits
but does retain his previously issued five shares of Series Preferred A Stock.
On
October 15, 2018, the Company executed an Employment Agreement (“Teeple Agreement”) with Stanley L. Teeple. The Teeple
Agreement provides that Mr. Teeple services as the Company’s Chief Financial Officer and Secretary for a term of 4 years.
The Teeple Agreement also provides for compensation to Mr. Teeple of $15,000 cash per month and the issuance of 1 share of Series
A Preferred Stock proportionately vesting over four years beginning December 31, 2018 upon execution of the Teeple Agreement.
The Teeple Agreement can be terminated upon the resignation or death of Mr. Teeple, and also can be terminated by the Company
due to the failure or neglect of Mr. Teeple to perform his duties, or due to the misconduct of Mr. Teeple in connection with the
performance. In May 2019 Mr. Teeple was granted an additional 3 shares of Series A Preferred.
On
December 28, 2018, the Company executed an Employment Agreement (“Ferro Agreement”) with Pasquale Ferro for Mr. Ferro
to serve as Pure Health Products’ president for cash compensation of $15,000 per month and the total issuance of 5 share
of Series A Preferred Stock proportionately vesting at the beginning of each year for a term of 4 years. Mr. Ferro may terminate
his employment upon 30 days written notice to the Company. The Ferro Agreement has an initial term of four years and can be terminated
upon the resignation or death of Mr. Ferro, and also can be terminated by the Company due to the failure or neglect of Mr. Ferro
to perform his duties, or due to the misconduct of Mr. Ferro in connection with the performance.
Effective
September 6, 2019 (the “Effective Date”), Can B̅ Corp. (the “Company” or “CANB”) approved
the appointment of Johnny J. Mack (“Mack”) as its President and Chief Operating Officer. Mack had been serving as
the Company’s interim COO. The Company and Mack have entered into a new Employee Services Agreement (the “Mack Agreement”)
to memorialize the terms of the foregoing. In consideration for Mack’s services, Mack would (i) receive a base salary of
$15,000 per month, subject to increase after each yearly anniversary of the Agreement, (ii) be eligible to receive annual cash
or stock bonuses, (iii) be entitled to four weeks’ vacation time and five paid days for illness in accordance with the Company’s
policies, and (iv) receive a total of 106,667 options (“Mack Options”) to purchase shares of the Company’s common
stock, with 26,667 Mack Options vesting on the effective date and additional tranches of 26,667 Mack Options vesting on each of
the first, second, and third anniversaries of the Effective Date, assuming Mack’s continued employment. Each Option is exercisable
at a price of $0.30 per share. The Company also agreed to hold harmless and indemnify Mack as authorized or permitted by law and
the Company’s governing documents, as the same may be amended from time to time, except for acts constituting negligence
or willful misconduct by Mack. The Company agreed to pay Mack a severance in the event the Mack Agreement is terminated by the
Company without cause or by Mack for “good reason” or by reason of Mack’s death or disability. On October 4,
2019 Mack resigned from all of his officer and director positions and the Company settled his termination for payment of all accrued
expenses, payout of all accrued time and base compensation of $13,315 and retention of his already earned 26,667 options. Mr.
Mack has left the Company.
In
addition, on October 10th, 2019 the Company appointed Philip Scala as its interim COO. Mr. Scala has acted as founder
and CEO of Pathfinder Consultants International, Inc. (“Pathfinder”) since 2008. Pathfinder offers unique expertise
and delivers the information you need to make informed decisions, whether in times of crisis or in the course of simply running
your business. Prior to forming Pathfinder, Mr. Scala served the United States both as a Commissioned Officer in the US Army for
five years followed by his 29 years of service with the FBI. Mr. Scala received his bachelor’s degree and Master of Business
Administration in accounting from St. John’s University, he also earned a Master of Arts degree in Psychology from New York
University. The Company has entered into an employment agreement with Mr. Scala. Pursuant to the agreement, Mr. Scala will receive
a base salary of $2,500 per month. He will be entitled to incentive bonuses and pay increases in accordance with the Company’s
normal policies and procedures. Mr. Scala will also receive options to buy 1,667 common shares of the Company at a price of $0.30
for a period of three years. The initial term of the agreement is for 90 days. The agreement renews for additional 90-day periods
unless terminated by either party. The agreement otherwise contains standard covenants and conditions.
Consulting
Agreements
On
July 15, 2020, we engaged an advisor to provide consulting services under an Investor Relations and Advisory Agreement (the “Advisory
Agreement”). Pursuant to the Advisory Agreement, we agreed to pay the Consulting Firm a restricted common stock monthly
fee of $5,000 per month for the initial 3 months., $6,250 per month for months 4-6., $7,500 per month for month 7 and after. At
CANB’s option, the monthly fee may be payable in part or in whole in cash. Monthly Fee, such amount shall be paid via issuance
of restricted common shares of CANB. The shares are to be issued in the name of Tysadco Partners. The number of common shares
earned each month shall be calculated and issued on a quarterly basis prior to each 90-day period and based on the value at the
closing price on the last day of the preceding period. All common shares earned by the Consultant pursuant to this Agreement shall
be issued by CANB on a quarterly basis. CT shall not have registration rights, and the shares may be sold subject to Rule 144.
On
December 8, 2019, the Company executed a Consulting Agreement with Seacore Capital, Inc. (“Seacore”) for Seacore to
serve as the Company’s consultant for stock compensation of a total of 8,333 restricted shares each quarter from 4th
quarter 2019 through 3rd quarter 2020. The shares shall not have registration rights, and the shares may be sold
subject to Rule 144.
Lease
Agreements
On
September 11, 2015, the Company executed a lease agreement with an unrelated third party for office space in Hicksville, New York
for a term of 37 months. The lease provides for monthly rentals of $2,922 for lease year 1, $3,009 for lease year 2, and $3,100
for lease year 3. The lease also provides for additional rent based on increases in base year operating expenses and real estate
taxes. On August 6, 2018, the Company renewed the lease agreement for a term of 36 months starting November 1, 2018. The lease
provides for monthly rentals of $3,193 for lease year 1, $3,289 for lease year 2, and $3,388 for lease year 3. In October 2019,
the Company modified and extended the lease agreement for a term of 30 months starting November 1, 2019. The lease provides for
monthly rentals of $3,807.05 for year 1 and $3,921.26 for the remaining eighteen months. The original $100,681 right-of-use asset
and $90,591 lease liability was adjusted to $103,260 with the modification.
The
Company leases office space in numerous medical facilities offices under month-to-month agreements.
Rent
expense for the years ended December 31, 2020 and 202019 was $234,790 and $246,968, respectively.
At
December 31, 2020, the future minimum lease payments under non-cancellable operating leases were:
Year ended December 31, 2021
|
|
|
47,055
|
|
Year ended December 31, 2022
|
|
|
15,685
|
|
|
|
|
|
|
Total
|
|
$
|
62,740
|
|
The
lease liability of $43,506 at December 31, 2020 as presented in the Consolidated Balance Sheet represents the discounted (at our
10% estimated incremental borrowing rate) value of the future lease payments of $62,740 at December 31, 2020.
Major
Customers
For
the twelve months ended December 31, 2020, there were no customers that accounted for more than 10% of total revenues.
For
the twelve months ended December 31, 2019, there were no customers that accounted for more than 10% of total revenues.
NOTE
15 – Related Party Transactions
LI
Accounting Associates, LLC (LIA), an entity controlled by a relative of the Managing Member PHP, is a vendor of CANB. At December
31, 2020, CANB did not have an account payable due to LIA. For the twelve months ended December 31, 2020, CANB had expenses to
LIA of $64,400.
During
the twelve months ended December 31, 2020, we had products and service sales to related parties totaling $0.
NOTE
16 – Prior Period Adjustment
The
accompanying consolidated financial statements of the Company have been restated to correct an error made in the prior year. The
error relates to an understatement of intangible assets by $283,345 and an understatement of stock- based compensation of $1,308,290.
Retained earnings as of December 31, 2020 has been adjusted for the effect of the restatement on the prior year.
NOTE
17 – Subsequent
Events
In
accordance with FASB ASC 855, Subsequent Events, the Company has evaluated subsequent events through March 25, 2021, the
date on which these consolidated financial statements were available to be issued. There were material subsequent events that required
recognition or additional disclosure in these consolidated financial statements as follows:
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain
of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community
as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic,
based on the rapid increase in exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full
magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively
monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce.
Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the
effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the year ended December 31,
2021.
On
February 8, 2021, the Company’s Board of Directors approved the designation of the Series D Preferred Shares and the number
of shares constituting such series, and the rights, powers, preferences, privileges and restrictions relating to such series.
On March 27, 2021, the Company filed an amendment to its articles of incorporation to authorize 4,000 shares of a new Series D
Preferred Stock with a par value of $0.001 each. All Series D Preferred Shares shall rank senior to all shares of Common Stock
of the Company with respect to liquidation preferences and shall rank pari passu to all current and future series of preferred
stock, unless otherwise stated in the certificate of designation for such preferred stock. Each Series D Preferred Share shall
have voting rights equal to 10,000 shares of Common Stock, adjustable at any recapitalization of the Company’s stock. In
the event of a liquidation event, whether voluntary or involuntary, each holder shall have a liquidation preference on a per-share
amount equal to the par value of such holder’s Series D Preferred Shares. The holders shall not be entitled to receive distributions
made or dividends paid to the Company’s other stockholders. Except as otherwise required by law, for as long as any Series
D Preferred Shares remain outstanding, the Company shall have the option to redeem any outstanding share of Series D Preferred
Shares at any time for a purchase price of par value per share of Series D Preferred Shares (“Price per Share”). Should
the Company desire to purchase Series D Preferred Shares, the Company shall provide the Holder with written notice and a check
or cash in an amount equal to the number of shares of Series D Preferred Shares being purchased multiplied by the Price per Share.
The shares of Series D Preferred Shares so purchased shall be deemed automatically cancelled and the Holder shall return the certificates
for such share to the Corporation. On or around March 27, 2021, the Company issued Mr. Alfonsi, Mr. Ferro, and Mr. Teeple Series
D Preferred Stock in the amount of 600 shares each and to COO Philip Scala in the amount of 150 shares, collectively representing
19,500,000 voting shares.
On
February 22, 2021, the Company entered into a material definitive agreement with its wholly owned subsidiary, Radical Tactical,
LLC, a Nevada limited liability company and Imbibe Health Solutions, LLC, a Delaware limited liability company (“Imbibe”),
pursuant to which Imbibe agreed to sell certain of its assets to Radical Tactical. The assets to be purchased (“Assets”)
include the intellectual property rights, including trademarks, logos, know how, formulations, productions procedures, copyrights,
social media accounts, domain names and marketing materials relating to its branded products containing CBD, including a muscle
and joint salve, unscented fizzy bath soak, CALM massage oil, Me x 3 Metabolic Energy (energy and dietary supplement), and Muscle,
Joints & Back CBD Cryo Gel; inventory; and goodwill. In exchange for the Assets, the Company has agreed to pay Imbibe Sixty-Five
Thousand Dollars ($65,000) in the form of shares of common stock of the Company (with standard restricted legend, the “Shares”)
at a price per share equal to the average price of the common stock of the Company during the ten (10) consecutive trading days
immediately preceding the closing.
On
March 11, 2021, Company entered into an Asset Acquisition Agreement, which was fully executed on March 17, 2021, with multiple
sellers (each, a “Seller” and, collectively, the “Sellers”), pursuant to which the Sellers agreed to sell
certain assets to Company, and to transfer such assets to Botanical Biotech, LLC, a newly-formed, wholly-owned subsidiary of the
Company (“Transferee” or “BB”). The assets purchased (“BB Assets”) include certain materials
and manufacturing equipment; goodwill associated therewith; and marketing or promotional designs, brochures, advertisements, concepts,
literature, books, media rights, rights against any other person or entity in respect of any of the foregoing and all other promotional
properties, in each case primarily used, developed or acquired by the Sellers for use in connection with the ownership and operation
of the BB Assets. In exchange for the BB Assets, the Company originally agreed to pay the Sellers the fair value of the BB Assets,
as determined by a neutral third-party appraiser selected by the Company and Sellers. Notwithstanding the foregoing, the parties
have agreed that, in lieu of engaging a third-party evaluator, the Company will pay the Seller a maximum of $355,056.78, payable
half in the form of cash or cash equivalent and half in the form of restricted shares of common stock of the Company (the “Shares”)
at a price per Share equal to the average closing price of the common stock of the Company during the ten (10) consecutive trading
days immediately preceding the closing. The Company has agreed to indemnify the Sellers for certain breaches of covenants, representations
and warranties and for claims relating to the BB Assets following closing.
The
Board of Directors had previously designed a Preferred Series C share designation and included that issuance in the Employment
Agreements of CEO Marco Alfonsi, CFO, Stanley L. Teeple, and Pure Health Products LLC President Pasquale Ferro in the amount of
200 shares each. Previously the Board had released the issuance of 100 of those shares. The Company released the remaining 100
shares granted under those agreements on March 23, 2021. Out of the 200 each authorized, 50 have been issued to each employee.
n
January 1, 2021, the Company issued a convertible promissory note to KORR Acquisition Group, Inc. in the principal amount of $175,000
for consulting services provided. The note had a maturity of one year and accrued interest at a rate of 6% per annum. On or around
March 26, the Company paid the note in full. KORR used the proceeds from the Note and re-invested it through the Company’s
Regulation A offering.